The Dutch Legal Perspective on American e-discovery

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1 The Dutch Legal Perspective on American e-discovery Marielle Koppenol-Laforce Part of the Houthoff Buruma In-house Counsel Practical Guide US e-discovery in the Netherlands, November How does a non-american company end up getting involved in e-discovery? The most obvious way for a non-american company to get involved in the US e-discovery process is to become involved in litigation in the United States. However, there are more indirect ways. Here are a few examples: A Dutch company has a branch in the United States and that branch is sued. A Dutch company merely sells products in the US market, but is sued because of those products. The Dutch company could become involved even if the sales were conducted through a chain of non-affiliated sellers. Or if the sales were not aimed at the US market at all, but the Dutch company failed to make an attempt to make sure they would not be sold on the American market. A Dutch company is involved in proceedings (pending or contemplated) in the Netherlands or elsewhere, and a party applies under section 1782 of Title 28 of the United States Code for discovery in a U.S. court. This could happen even if the Dutch company were not a party to the proceedings, but for example had only sold products to a party (or assigned contracts or rights) and materials relating to this were in the United States because of the domicile of a director or office. What discovery is available in the Netherlands under the Hague Evidence Convention? In principle, when a party is involved in proceedings in either the United States or the Netherlands, the party can rely on the Hague Evidence Convention i to attempt to obtain information from another party in a country other than where the case is pending. The Hague Evidence Convention is a multi-party convention that is binding on both the US and the Netherlands. Under the Hague Evidence Convention, a Dutch court may be requested to order the discovery requested; however, if the request is granted, the discovery will then be conducted in accordance with Dutch law. Even if the Hague Evidence Convention is relied on by an

2 American court, this process cannot lead to the introduction in the Netherlands of a type of discovery beyond what is permitted by Dutch law, including US-style discovery or e- discovery. In particular, the request cannot be executed by a Dutch court beyond the limits of article 843a of the Dutch Code of Civil Procedure ( DCCP ). ii Furthermore, when the Hague Evidence Convention was signed, the Dutch government stated publicly that it would not assist with requests to conduct fishing expeditions. Regardless, it does seem that the Dutch courts are increasingly becoming more willing to force parties to produce documents even when these documents are described in the request in a general sense. From a recent questionnaire issued by the Hague Conference on Private International Law, it seems that, in the case of discovery of electronically stored information ( ESI ), requests from U.S. courts to foreign courts under the Hague Evidence Convention are being executed as if the documents requested were paper documents. What discovery is available in Dutch civil procedure? The Hague Evidence Convention does not prevent a party from gathering evidence by applying directly to the local courts in that other country if those courts permit it. Any party (whether Dutch or international) may attempt to obtain documents, including ESI, through the request process provided for in article 843a of the DCCP. Dutch or international parties may also obtain documents in proceedings pending in the Netherlands in the usual way, either in an interlocutory motion or as part of the exchange of evidence during the main proceedings. Whether a discovery request is made under the Hague Evidence Convention or the DCCP, it is made under article 843a of the DCCP. iii Article 843a states: 1. Anyone who has records at his disposal or in his custody must allow a person with a legitimate interest in doing so to inspect, to have a copy of, or to have an extract from, those records that pertain to a legal relationship to which he or his legal predecessors are party. "Records" includes information recorded on a data medium. 2. If necessary, the court may determine how an inspection is to be conducted or how a copy or extract is to be produced. 2/7

3 3. Anyone who by virtue of his office, his profession or his relationship has a duty of confidentiality need not comply with this request if the records are at his disposal or in his custody only for that reason. 4. Anyone who has the records at his disposal or in his custody need not comply with this request if there are serious reasons for not doing so and if it may reasonably be assumed that the proper administration of justice is safeguarded even if the information requested is not provided. Under this article, a party is required to submit documents and information (whether electronically stored or not) if and in so far as they: relate to a specific legal relationship (tort, contract); are described with sufficient specificity; and are in the possession of the party that is being asked to submit them. The scope of Dutch discovery is undeniably narrower than what is available in the United States or even the United Kingdom. However, there does seem to be a shift in the Dutch courts to broader disclosure obligations. In a case involving Fortis, iv the court ordered the other party to provide all data on a data medium that was in the possession of Mourant and that related to financing structure and/or FCC memorandum, documents relating the public offering, including s, letters, memoranda, notes, advice letters and draft documents. In making this decision, the court probably found it significant that before the Fortis group was split up, the requesting company had itself had possession of these documents or at least had had an undeniable right to them. In another decision, v it was held that for discovery to be ordered, it was sufficient if the court could ascertain which documents were being requested and that it was reasonably certain that those documents existed. The requesting party was required to try to describe those documents in as much detail as possible, but in this case that was sufficient. The latest challenge to the scope of article 843a of the DCCP will most likely be the request submitted in one of the Nigerian pollution suits started against Shell plc. vi The claimants are a Dutch environmental organisation (Milieudefensie) and a few individuals living in Nigeria. The suit concerns a dispute about oil leakage from a pipeline operated by a joint venture that includes an indirect subsidiary of Shell plc. There are three similar cases pending in the Hague Court. In one of the cases, the court held that it had jurisdiction because the office of Shell plc is in The Hague and because of the connection between the claims made against Shell plc and Shell Petroleum Development Company of Nigeria. The documents submitted to the court by Milieudefensie are available on Milieudefensie s website. The request made under article 843a of the DCCP is extremely broad and includes a request for board minutes, 3/7

4 reports and any material connected to the condition of the relevant pipeline in Nigeria. The claimants are also asking for documents showing that Shell had been requiring its Nigerian subsidiary to comply with its environmental policy. For an American lawyer this would not be a particularly broad discovery, but it remains to be seen whether a Dutch court is willing to shift further towards the American civil procedural view of what is discoverable. If and when the request is granted, the second issue will be how to manage it. The Dutch civil procedural system lacks the rules, customs and protections that have developed as part of the US discovery process. This problem especially applies to the vast amount of ESI involved. Are there any defenses against an e-discovery request? If a discovery request is made in the United States (whether in proceedings there or, under section 1782 in title 28 of the United States Code, in connection with proceedings in the Netherlands), there is not much that can be done. The main thing an internationally active company can do to protect itself from an American e-disclosure request is to have its systems in order so that the information can be provided at the lowest possible cost. Experience has shown that informing a US court of the more restricted role of discovery in the Netherlands usually does not prevent a US court from giving the order. A US court cannot really be persuaded to deny an e-discovery request, even if the request in the United States is a limited one, and the request for documents could have been submitted more expeditiously to the Dutch courts directly. Nor is it a defence to argue that the form of the evidence is insufficient. A Dutch court has the discretion to accept any form of evidence whatsoever. As discussed in another article in this guide, sometimes privacy laws can provide a reason for limiting discovery. However, this is not always applicable or effective. A mechanism that might be employed to limit exposure to the American-style discovery is for parties in international contracts to agree on rules limiting discovery and to insert an appropriate clause in the contract. This would not work against third parties, but it might prevent the other party from starting the discovery process set out in section 1782 of Title 28 of the United States and, if the litigation is taking place in the US, limit the discovery process. Under Dutch law, these agreements are considered to be agreements relating to the burden of proof (bewijsovereenkomst) and are allowed. vii 4/7

5 If sensitive information is involved, this information is commonly protected by obtaining a protective order from the American court. However, this order will not have the same effect if the protected information is being used in Dutch litigation. In this event, to obtain the same kind of protection, one would have to file a request to the Dutch court for the Dutch proceedings to be closed to the public (met gesloten deuren) viii and published only in a format in which the names are not stated. Such a request is usually refused in ordinary commercial disputes, but if an American protective order has already been issued, a Dutch court will most likely be more inclined to grant the request. When obtaining a protective order from a US court, it is advisable to have a clause inserted in the order stating that both parties are to cooperate in obtaining the same protection in foreign proceedings. How can a Dutch company balance US preservation requirements with Dutch practice? In Dutch civil procedure, there are no specific rules for the preservation of documents and certainly not for the preservation of documents starting at a certain point in time. The discovery and disclosure process common in the US and UK is not known to Dutch law. This raises the risk that s will be deleted accidentally or intentionally at a time at which it is considered to be perfectly legal to do so in Dutch civil procedure, but illegal under the US or UK rules. Not only is it not fully clear to a Dutch company when the company must stop deleting any documents (including ESI) under the applicable US or UK rules, but the Dutch lawyers advising these companies are not even alerted by a notice or letter from the US or UK party that that deleting is no longer acceptable. Ordinarily, any deleting that takes place in the course of normal practice is acceptable, even in the US system, at least up until a certain point in time (see regarding duty to preserve previously in this guide).. A company could therefore explore whether some protection could be had from introducing a strictly and frequent deletion routine. Especially if a company has a sensitive research and production programme, it might be worthwhile to introduce a regular deletion routine for s exchanged between employees. What should be done in the event of attachment (beslag) of electronic information? In Dutch law it is possible for electronic data stored on computer hard disks, servers or other storage devices to be attached pending the outcome of litigation. The procedure of attaching materials that constitute evidence was introduced into the DCCP for intellectual property 5/7

6 disputes. By not construing this process too narrowly, Dutch courts have accepted that it might be applied in other disputes. In order for an attaching party to obtain something useful, and at the same time for the operations of the attached party not to be disrupted, the court usually imposes certain conditions in the attachment. For example, the order may include the requirement that the attaching party not be allowed to witness the transfer or examine the data itself. The court may order that the data be copied within a short time period. As the bailiff (deurwaarder) is not expert in this field, he or she may require that the requesting party consent to the hiring of an ICT expert. Usually the data copied must be held pursuant to a storage agreement between the attaching party, the bailiff and a third party knowledgeable in ICT matters. A court may lift an attachment if it appears in a summary review that there is no claim. A Dutch court will not be quick to lift an attachment aimed at preserving evidence if the attaching party has an arguable case under article 834a of the DCCP, especially if the attaching party is not entitled to examine the data attached. What role does good corporate governance play in the e-discovery process? Good corporate governance plays a major role in handling e-discovery. First, a company should prepare itself by having strict rules relating to electronic information. We all know that mistakes are usually caused by human error, so to have guidelines in place is not enough. It is useful to have wide-ranging policy that addresses issues like: what may be done during office hours, how to deal with s, how to store s, to whom cc s and bcc s should be sent, and who in the end holds the final agreements. However, this policy is only useful if someone checks and ensures compliance. To do all that simply in preparation for the unlucky day that e-discovery comes knocking on the door would be rather costly. This is where corporate governance comes in. A board should at all times be aware of the rights and duties of the company. This means that systems that make it easy to access contracts should be put into place. This should prevent each salesperson from starting to invent his or her own contractual arrangements. If the company is of a certain size, it cannot do without a document management system. Nowadays, because ICT systems can link huge amounts of information together, a neat system will not just help meet corporate goals, but also save a lot of time when that knocks comes on your door. 6/7

7 Good corporate governance also requires having a system that stops employees from not sending s faster than they can think or blurting everything they can think of out in the . Badly drafted s (often in poor English), including internal s, can cause quite a bit of damage. So if a company is required to communicate in a foreign language, make sure the day-to-day communicators have mastered the language sufficiently to prevent badly worded s from being used against the company. All employees should be informed about the possibility and conduct of discovery proceedings so that they realise that there are some things that should never be found in any or document. There is nothing new about this advice but what is new is that s can have a strange effect on some people, seducing them into believing that the normal commonsense rules no longer apply. What measures can be taken? The following measures may help a Dutch company to avoid American e-discovery: If there is no need for products to be sold on the U.S. market, and not much can be gained there, it could be decided to explicitly exclude any resales on US territory. Furthermore, consideration could be given to special contractual clauses restricting discovery. Finally, strict rules could be introduced for traffic and the saving and deleting processes. For a Dutch company that becomes subject to e-discovery, here is one measure that may mitigate its consequences: Obtain a protective order from the American court for the protection of content and if necessary the Dutch equivalent. Can e-discovery be a good thing? A Dutch company engaged in litigation is naturally concerned about shielding itself from the high cost of American style e-discovery, but in some circumstances e-discovery could serve as a litigation tool. Because US civil procedure allows discovery in the United States in Dutch legal proceedings, the sheer cost of the discovery process can be a useful means of forcing a settlement in pending Dutch litigation. i See footnote 10. ii Wetboek van Burgerlijke Rechtsvordering or Rv. iii Unofficial translation. There are a few other articles in Dutch law that may be used to obtain information, but they do not really improve the discovery available under article 843a of the DCCP. 7/7

8 iv Summary Proceedings Judge, Rotterdam Court, 25 June 2009, KG ZA JOR 2009/250. v Summary Proceedings Judge, Utrecht Court, 18 August 2010, LJN BN5864. vi The Hague Court, 30 December 2009, JOR 2010/41. vii See Attorney General Asser in his submission to the Dutch Supreme Court decision of 14 February 1992, NJ 1992, 245 (Note by P. van Schilfgaarde). viii Arts , DCCP 8/7